As Australia’s housing affordability crisis builds, a concerted effort is needed by all levels of government to help first home buyers enter the market and ensure low income earners have adequate housing, according to a new report.
Leading property researcher CoreLogic and PowerHousing Australia today launched the Australian Affordable Housing Report 2018-19: 25 Million Milestone Edition, a comprehensive overview of the main drivers relating to affordable housing for low income earners.
While the report showed some mixed signs of reprieve in the affordable housing crisis, the problem could worsen if the construction peak falls off into a sustained period of undersupply.
“With high levels of housing stress, Australians are finding it challenging to afford rent and aspirational first home-buyers, particularly young people, face great difficulty breaking into the home ownership market,” Mr Proud said.
“There is growing public and political appreciation of our housing affordability crisis and increasing pressure for the issue to be tackled swiftly and proactively, though we face significant challenges moving forward.
“It is clear that despite signs of future affordability gains, the key indicators of housing affordability in Australia show that the gap for those on low incomes to meet rental and mortgage obligations is still wide. However, supply volume has taken the heat off housing prices across most capitals.”
He said Australia was experiencing record building levels, with more than 221,000 dwellings built over the past year, and in turn increases in house prices were slowing, providing hope for buyers currently locked out of the market.
However, a downturn in building activity is likely, with new builds predicted to drop by up to 50,000 dwellings per year. This would see dwelling construction fall 20,000 below the 195,000 required to meet future demand.
“Future underbuilding will put upward pressure on prices and see demand outstrip supply, which is why there is a need for Community Housing Providers (CHPs) to step in and fill the affordable housing void,” Mr Proud said.
“It is possible for affordable housing to make up 10 to 20 per cent of all new dwelling delivery in the future and secure a better build rate, improve affordable options, secure taxation and jobs if given the right settings.
“The development of the National Housing Finance and Investment Corporation (NHFIC) has been a major step forward in addressing some structural barriers to the cost of developing more aﬀordable housing and presents an opportunity to grow the aﬀordable housing sector.”
CoreLogic Head of Research, Tim Lawless, said with housing values trending lower in our most expensive cities, there had been some reprieve in housing affordability, but Sydney and Melbourne remained out of reach for many.
“With dwelling prices still very high relative to incomes, especially in Sydney and Melbourne, it’s likely that the typical household will find it difficult to afford to purchase the median priced dwelling,” he said.
“Additional focus by lenders to reduce exposure to high debt-to-income ratio borrowers is likely to compound the situation in these markets and redirect a larger component of market demand towards the lower half of the pricing spectrum.
“We are already seeing evidence of higher demand across the lower valuation quartiles in Sydney and Melbourne, while higher value markets lead the decline in housing values.”
- Growing underemployment means a greater proportion of people are likely to be unable to compete in the property market.
- Slow wage growth will continue to challenge the purchasing capacity of those on low to middle incomes.
- Increasing rates of rental stress has serious implications for the private rental market and the social housing sector, including the community housing sector, because rental market affordability continues to decline, more households will need housing support.
- The social housing sector is already stretched, with around 189,400 applicants on social housing waiting lists.
- The size of Australia’s housing market illustrates the difficulty for the Federal Government’s current level of intervention (approximately $10b) to have a meaningful impact on housing affordability.
Nicholas Proud, PowerHousing Australia, 0408 538 126
Mitch Koper, CoreLogic, Ph: 1300 472 767 firstname.lastname@example.org
The latest edition of the report report is available for download here